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Affordable Care Act (ACA)

Overview

T + T

Background

HISTORY

The narrative of health care reform has a long history in the United States dating back to the 19th century with the Bill for the Benefit of the Indigent Insane (one of the earliest federal health care proposals), which would have established asylums for the indigent, insane, blind and deaf. The bill passed both houses of the U.S. Congress, but was vetoed by President Franklin Pierce, who believed social welfare was the responsibility of the states and not the federal government.

It was during the Great Depression, when an increasing number of the population became unable to afford medical services, that the possibility of a national health insurance program to cover every American became part of the public discourse. In 1933 President Franklin D. Roosevelt wanted to include legislation for publicly funded health care programs to his pending Social Security legislation. However, the American Medical Association (AMA), as well as state and local affiliates of the AMA, attacked these provisions as “compulsory health insurance.” Roosevelt eventually removed the health care provisions from the Social Security bill in 1935. Fear of organized medicine’s opposition to universal health care became standard for decades after the 1930s.

In November 1945 President Harry Truman called on Congress to initiate a ten-year plan to transform the existing American health care system into one where coverage would be compulsory for all people. Once again the AMA warned that such “socialized medicine” would be detrimental to Americans’ health care and the plan ultimately stalled in Congress.

With the outbreak of the Korean War in June 1950, the Truman administration and Congress were forced to turn their attention away from the health care debate. However, the simple fee-for-service relationship whereby patients paid doctors out-of-pocket was being replaced by private health insurance coverage. By 1951, some 77 million U.S. residents had purchased some type of voluntary accident or sickness insurance.

In 1965 with the continuing problem of the uninsured, especially among the elderly, President Lyndon Johnson passed legislation creating both the Medicare (for the elderly) and Medicaid (for the low-income) programs. The legislation was not without opposition. The conflict centered mainly on the grounds that it was compulsory, it represented socialized medicine, it would reduce the quality of care, and it was “un-American”, the same arguments used in warning against the Affordable Care Act. Indeed in 1961 Ronald Reagan warned people against the passage of Medicare by warning Americans that it represented a “loss of our freedom.” Refer to Health Programs, Medicare, Overview for a comprehensive history of Medicare and Health Programs, Medicaid, Overview for a history of the Medicaid program.

In 1971 President Richard Nixon backed a proposal requiring employers to provide a minimum level of health insurance for their workers while also maintaining competition among private insurance companies. By contrast, Senator Ted Kennedy championed the Health Security Act, a universal single-payer health reform plan directed and financed entirely by the federal government. This marked the start of a career-long effort by Kennedy to overhaul the country’s health care system. Ultimately, neither proposal was passed.

When Jimmy Carter was elected President in 1976 he promptly called for “a comprehensive national health insurance system with universal and mandatory coverage.” But when the nation fell into a deep recession soon after Carter took office, health care was relegated to the “back burner” of Congressional concerns.

In 1986 Congress passed the Emergency Medical Treatment and Active Labor Act, which required hospitals to screen and stabilize all emergency-room patients. It also proposed the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, which allows employees to pay for coverage through their former employer’s group health plan for up to 36 months after losing their jobs.

In 1993 President Bill Clinton launched an effort to provide universal health care coverage based on the idea of “managed competition,” where private insurers would compete in a tightly regulated market. The plan called for everyone to carry health insurance and to contribute to its cost, though government subsidies would be made available for the poor. Moreover, the plan required employers to pay 80% of all policy premium costs for workers and their families. People who were already covered by existing government programs, such as Medicare, Medicaid, Veteran’s health benefits, Indian Health Service, etc. would simply continue to use those programs. Ultimately, the plan failed to pass through the U.S. Congress.

However, in 1997 President Clinton signed legislation creating the State Children’s Health Insurance Program (SCHIP), an initiative designed to provide federal matching funds to states for health insurance covering children whose family incomes were modest but still too high to qualify for Medicaid.

In December 2003, President George W. Bush signed the Medicare Modernization Act, which expanded Medicare to include prescription drug coverage. Refer to Health Programs, Medicare Part D, Overview for a comprehensive history of this benefit.

During the 2008 presidential campaign, then Senator Barack Obama called for universal health care through the creation of a National Health Insurance Exchange that would include both private insurance plans and a Medicare-like government run option. Coverage would be guaranteed regardless of health status or gender, and premiums would not vary based on health status. Insurance affordability products, that is a premium tax credit and a cost sharing reduction subsidy, would be available to offset the costs of medical insurance for modest income households.

On March 23, 2010, in the most significant regulatory overhaul of the country’s health care system since the passage of Medicare and Medicaid, President Obama accomplished his goal by signing the Patient Protection and Affordable Care Act; and on March 30, 2010 he signed the Health Care and Education Reconciliation Act of 2010, collectively referred to as the Affordable Care Act (ACA) of 2010. Although not successful in creating a Medicare-like government run program for all, it is estimated that the ACA would provide health insurance coverage for tens of millions of Americans and would decrease the number of uninsured in the U.S. Go to https://www.cdc.gov/nchs/nhis/releases.htm and scroll to Early Release Reports on Detailed Estimates of Health Insurance Coverage for the latest data. In addition, the ACA created a new agency, the Center for Medicare and Medicaid Innovation, which is intended to research health reform ideas through pilot projects.

However, in opposition to the ACA, 28 states filed joint or individual lawsuits to overturn the individual mandate of the law, which requires most uninsured Americans to acquire health insurance, or pay a fine, if they do not meet one of the exemptions. On June 28, 2012, in a 5-4 decision, the U.S. Supreme Court upheld the constitutionality of the ACA, particularly its core provision, the individual mandate. The Court upheld the mandate on the grounds that it was within the taxing authority of Congress. Despite this, the Court restricted the federal government’s ability to withhold federal Medicaid funds if a state elects not to implement the Medicaid expansion provision contained within the ACA. This ruling effectively gives states the option to expand their Medicaid program or not (Medicaid expansion allows a greater number of low-income households access Medicaid.)

On January 20, 2017, President Donald Trump signed the executive order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal. Click here for the National Health Law Program’s Issue Brief of The Impact of Executive Order 13765 on the ACA.

WHO ADMINISTERS THE PROGRAM

Responsibility for implementing the ACA provisions, administering new and revised programs, and overseeing ACA funding rests with the U.S. Department of Health and Human Services (HHS).

The Office of Inspector General (OIG) provides technical assistance on identifying risks and preventing fraud, waste, and abuse.

The IRS administers the tax provisions included in the law, including the right to levy a penalty against businesses that do not provide insurance to employees, as well as on individuals who do not have health insurance and do not meet an exemption from the individual mandate. The IRS is also responsible for the distribution of annual subsidies to 18 million low income people who qualify for insurance affordability products that will assist with the costs of purchasing health insurance, as well delivering tax credits to small businesses that purchase coverage for workers. In addition, the IRS collects taxes on medical devices and a Medicare tax on people making more than $200,000 a year. It also conducts compliance audits of tax-exempt hospitals.

While the ACA provides broad administrative responsibility, each State retains discretion in the establishment and operation of their Health Insurance Exchange, the online marketplace where individuals will be able to view health plan options and purchase qualified health plans. Indeed a number of states have elected not to create their own marketplace and instead rely on the federal marketplace, https://www.healthcare.gov. In New York, the NYS Department of Health has overall responsibility for creating and maintaining its health insurance exchange or marketplace, called the New York State of Health Marketplace, https://nystateofhealth.ny.gov.

FUNDING

Funding for the ACA comes from the federal government. The ACA will appropriate an estimated $100 billion over a ten-year period (federal fiscal years 2010 through 2019) in mandatory funding, and authorizes another $100 billion over the same time period in discretionary funding, which will be subject to the annual appropriations process. The amount of ACA funding available in any year will depend on many factors, including requests made by entities eligible for funding, changes to the law and funding amounts, and decisions by Congress regarding appropriations of discretionary funding.

There are a number of funding streams operating under the ACA. Over 47% of funding has been awarded through programs or tax credits for employers. Nearly 83% of funding comes from the ERRP (the Early Retiree Reinsurance Program), which has disbursed over $4.7 billion to public and private employers in every state. Over $2.6 billion was awarded to states to plan and establish their health insurance marketplaces. It also included grants to review health insurance premium increases, develop consumer assistance programs, operate and administer the pre-existing condition insurance pools, and loans to set up consumer oriented and operated health insurance plans.

Additional funding was awarded for special projects in Medicaid and Medicare to aid with outreach and enrollment, to implement innovative approaches to care for more complex populations, as well as rebates to Medicare consumers who reach the Part D coverage gap. Another important category of ACA funding is the prevention and public health category, which consists of funding to support initiatives aimed at reducing the prevalence of chronic conditions and improving the population’s health.

Summary of the Affordable Care Act

Starting with the health insurance system in place at the time of its passage, it is anticipated that the ACA will increase the number of insured by expanding Medicaid to cover more of the low-income population; providing additional federal support for the Children’s Health Insurance Program; encouraging employers to offer health insurance through tax credits and penalties; requiring most uninsured Americans and lawfully present individuals to purchase health insurance, if not insured through other means; and by providing federal assistance through insurance affordability products to purchase private health insurance coverage for moderate income households who do not qualify for Medicaid. The ACA also establishes significant nationwide consumer protections in the commercial health insurance market.

According to Obama Care Facts, https://obamacarefacts.com/sign-ups/obamacare-enrollment-numbers, the 2016 uninsured rate remains at an all-time low with the uninsured rate at 11.9% for Americans 18 – 64 and 8.6% of all Americans 0 – 65, which was 15.7% before the Affordable Care Act was signed into law.

Health insurance exchanges or marketplaces are a key component of the ACA. Consumers will shop online for qualified health plans. An individual/family is eligible to enroll in a qualified health plan if s/he is a citizen or an individual lawfully present in the U.S., is not incarcerated, and is a resident of the state in which the Marketplace is operating.

In addition, small businesses with up to 50 full-time equivalent employees are able to shop online to purchase qualified health plans for their employees. Small businesses are subject additional provisions under the ACA, go to https://www.sba.gov/content/employers-with-up-to-50-employees for more information. A provision in the ACA expanded the definition to 100 beginning full-time employees January 1, 2016; however recent legislation defines that this expansion is only at state option.

Beginning October 1, 2013 households began to purchase plans when the Marketplace officially opened for business.

During the annual enrollment period people are eligible to sign up for a health plan; individuals will also be able to switch to another health plan. After the open enrollment period ends qualified individuals and enrollees may be allowed a “special enrollment period” under certain circumstances, which allows them to enroll in a health plan or change plans on the Marketplace.

Note

While the Affordable Care Act will also impact employers, both large and small, this chapter focuses on the individual mandate and provisions for the individual and family, not for employers.

Health Products/Programs for Low-Income Households

THE PREMIUM TAX CREDIT

The premium tax credit is a federal subsidy for low and moderate income households that reduces the amount pf the premium an individual or family pays for health insurance by providing a tax credit to offset the amount of a plan’s premium. To qualify the individual/family must purchase a qualified health plan through the state’s health insurance marketplace, not be eligible for public health coverage, not have access to health insurance through an employer, be a U.S. citizen or lawfully present individual, and have an annual income up to 400% of the federal poverty level (FPL). Consumers can choose to receive the credit in advance or wait until they file their taxes and receive it as a refund. See below, The Premium Tax Credit for additional information.

THE COST SHARING REDUCTION

The cost sharing reduction is a federal subsidy for low and moderate income households that reduce the amount of out-of-pocket expenses, including deductible, co-payments and co-insurance. In order to qualify for this subsidy the household must purchase a silver level health plan through the state’s health insurance marketplace, not be eligible for public health coverage, be a U.S. citizen or lawfully present individual, and have an annual income up to 250% of the federal poverty level (FPL). Once enrolled, the eligible individual/family will automatically have reduced out-of-pocket expenses. See below, The Cost Sharing Reduction for additional information.

THE ESSENTIAL PLAN RESULTING FROM THE ACA

The Affordable Care Act gives states the option of creating a Basic Health Program, a health benefit for low-income residents. To qualify household income should be between 139% and 200% of the federal poverty level; be ineligible for public health programs, that is, Medicaid, Child Health Plus, Medicare; not have access to health insurance through an employer; be between the ages of 19 and 64; and not be incarcerated. Households enroll in a plan on the NY State of Health Marketplace. See below, Plans on the Marketplace & Who Qualifies, The Essential Plan.